Fixed Income June 2017 

Guide to finding yield globally

  • Learn what has happened to spreads in 2016-17 and how far up the yield curve investors should go.
  • Comprehend which regions are proving hotspots for yield.
  • Understand how advisers can get the right yield diversification for clients.
CPD
60min
Guide to finding yield globally

Introduction

Years of quantitative easing by central banks have compressed credit yields and has pushed investors into riskier assets.

But with the Federal Reserve and possibly the Bank of England seeking to raise rates in the long term, fixed income investors may want to consider how to adjust their exposure to this asset class.

Meanwhile, recent political shocks such as the Brexit vote and election of Donald Trump in the US have created a volatile environment, although there are still pockets of value out there in bonds.

As Fraser Lundie, co-head of credit at Hermes Investment Management, notes: "After a strong period for global credit returns, the scope for higher-risk companies to rally much further has diminished."

This guide will consider what has happened to credit spreads in 2016 and so far this year and look at how far up the yield curve investors should be prepared to go.

It will also find out where the global yield hotspots are for those investors who might be prepared to look beyond the domestic fixed income market and finally, how advisers can get the right yield diversification for their clients.

Contributors to this guide include: Nicolas Trindade, senior portfolio manager at AXA Investment Managers; Salman Ahmed, chief investment strategist at Lombard Odier; Al Jalso, senior portfolio manager at Russell Investments; Marika Dysenchuk, unconstrained fixed income product specialist at JPMorgan Asset Management; Fraser Lundie, co-head of credit at Hermes Investment Management; Ben Willis, head of research at Whitechurch Securities; Martin Horne, head of European high yield investments at Barings; Ben Edwards, fixed income manager at BlackRock; David Stubbs, global market strategist at JPMorgan Asset Management.

eleanor.duncan@ft.com

In this guide

CPD
60min
  1. Mr Trindade says credit spreads widened from mid-2015 to early 2016 in reaction to which two factors?

  2. Mr Willis says if investors believe interest rates and/or inflation numbers are going to increase more rapidly than consensus, what type of bonds will they be focusing on?

  3. JPMorgan Asset Management reveals there have been inflows of $68bn so far this year into what type of fixed income in the US market?

  4. Mr Ahmed says emerging market local currency bonds have yield potential but come with what?

  5. Mr Stubbs says correlations between government bonds remain high, meaning that investors can step out of their domestic market into higher yielding ones, such as which two countries?

  6. What is introducing some hesitation into the credit markets, according to Mr Lundie?

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